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ICAP PRC-3 Business and Economic Insights study materials
ICAP PRC-3 Business and Economic Insights study resources

ICAP PRC-3 Business and Economic Insights: Business strategy and governance

ICAP PRC-3 Business and Economic Insights · Work through your exam, one topic at a time.

All guide sections

Business strategy and governance

This domain tests how a business chooses where to compete and how it is controlled: strategic analysis tools, competitive positioning, and the governance mechanisms that align directors with shareholders.

Core concepts

  • Strategic analysis: PESTEL for the macro environment; Porter's five forces (rivalry, new entrants, substitutes, buyer power, supplier power) for industry attractiveness; value chain and VRIO for internal capability; SWOT only as a summary that must lead to choices.
  • Strategic options: Ansoff matrix (penetration, product development, market development, diversification); Porter's generic strategies (cost leadership, differentiation, focus) - being stuck in the middle erodes returns.
  • Portfolio tools: BCG matrix (star, cash cow, question mark, dog) guides cash allocation.
  • Governance: separation of ownership and control creates agency costs; controls include independent non-executive directors, separation of chair and CEO, an audit committee of independent directors, external audit, related-party disclosure and whistle-blowing channels.
  • Pakistan framework: Companies Act 2017 plus the SECP Listed Companies (Code of Corporate Governance) Regulations 2019, which prescribe board composition, audit committee independence and disclosure obligations.
  • Internal control and risk: COSO's five components (control environment, risk assessment, control activities, information and communication, monitoring); risk appetite; three lines of defence.

Worked example

A domestic manufacturer faces newly liberalised imports. Five-forces analysis shows low switching costs and strong buyer power, with scale too small for cost leadership. The reasoning chain runs from analysis to choice: differentiation through service and lead time, supported by a KPI on on-time delivery and a margin target, with the board monitoring execution through the audit and risk committee.

Traps that cost marks

Presenting SWOT as a list with no strategic conclusion; confusing mission (purpose) with vision (future state); treating governance as box-ticking rather than incentive alignment; ignoring implementation and measurement.